Is “Profit” A Dirty Word? No.

From: E
Sent: Tuesday, February 12, 2019 11:08 PM
To: Walter Block <wblock@loyno.edu>
Subject: profit

Walter

Here’s what Merriam Webster says about “profit.”.

Put more concretely.  If you have a brush that cost you paid $10 for, and I give you $10 for it, you have made NO profit.  Similarly, if you raise a carrot and I raise a radish, and we exchange, neither of us makes a profit.   I suspect that your insisting on no one acting except in terms of self-interest skews the dictionary meaning of the word.

E

Dear E:

As to “profit” we’ll have to agree to disagree.

The initial cost of the brush at $10 is entirely irrelevant. Sunken costs are sunk. Don’t cry over spilled milk. It does’t matter whether I’ve paid $5, $10 or $15 for it. Right now, I’ve got this brush. You offer me $10 for it. If I value it at $30, I won’t sell it to you; if I did, I’d suffer a loss of $20. If I valued it at $1, I’d make a profit of $9. So, I’d do it. If I valued it at exactly $10, I’d be indifferent between selling it to you and not selling it to you. (Austrian economists reject this notion). I wouldn’t do this since it would take some effort on my part to sell my brush to you, and there’d be no profit in the deal for me.

I like your radish more than I like my carrot. The difference is the profit I make when we barter these two goods. You rank the two goods in the opposite way. You, too, make a profit from the deal. All voluntary trades are mutually beneficial in the ex ante sense. Most in the ex post sense as well. This entirely exhausts what laissez faire capitalism is; voluntary interaction such as buying, selling, renting, borrowing, lending, gambling, giving, sharing (the commune, the kibbutz), etc. Thus laissez faire capitalism is necessarily beneficial to all participants. Note, murder, rape, theft, trespass, are not voluntary interactions. Therefore they are not part of laissez faire capitalism, the only economic compatible with libertarianism. Rather they are an aspect of crony capitalism, or economic fascism.

Best regards,

Walter

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1:43 am on May 30, 2019